India’s Leading BFSI and FinTech Companies 2021

16 Capital Adequacy 0 5 10 15 20 25 2016 2017 2018 2019 Capital to Risk-Weighted Assets Brazil India China (Mainland) Russia Sou th Africa Indonesia Source: IMF, RBI Banks across emerging markets remained adequately capitalized during 2019. Indonesian banks continued tomaintain the highest CRAR while Russian banks remained the lowest among the peers, although they improved their capital adequacy during the year. In India, banks improved CRARs with the government infusing capital into public sector banks and as private sector banks intensified capital raising efforts. Chinese banks, particularly small and medium sized ones, also bolstered their capital positions during the year. Indian Banking: Overview The ongoing pandemic has affected the Indian economy in the form of an unprecedented economic contraction, which in turn has cast a shadow on the performance of the domestic financial services segment and further dented consumer and investor confidence during 2020. As the pandemic hit Indian shores in February 2020, prompting stringent measures including nationwide lockdown and other restrictions, data released May-end showed India’s real GDP slumped to 4.2% in FY20, down from 6.1% a year ago; this was the slowest growth since FY10. All components of domestic demand were affected, except government final consumption expenditure, which provided sustained support to aggregate demand. On the supply side too, manufacturing activity, construction and transportation were badly affected. Agriculture and allied activities, however, remained resilient on the back of record production of food grains and horticulture and amid optimism of normal monsoons in 2020. Measures undertaken by the central government as well as the Government in response to the pandemic have to some extent eased monetary and liquidity conditions and ensured orderly markets and a secure and well-functioning payment settlement system. The Reserve Bank of India (RBI) introduced aggressive policy rate cuts, massive liquidity infusion into distressed sectors, institutions and instruments, moratorium as a temporary relief to borrowers and a time-bound window for restructuring of assets. Despite these efforts, credit flows to themost productive sectors and stressed sectors (as a result of the pandemic) continue to remain deficient. Going ahead, recovery of the financial services segment would depend on how quickly investor and consumer confidence is restored and the revival of the real economy. With the dawn of the new year FY21, ten public sector banks were merged into four with effect from April 1, 2020. The objective was to create next generation banks with strong national and global presence. Notwithstanding some initial hiccups, factors like government ownership, similar pay structure and career progression avenues for staff, and common core banking solutions helped smoothen the operationalisation of the merger. The merged entities are expected to reap benefits of synergy, especially in the case of branch network presence across regions. For example, United Bank of India, which had a large presence in the eastern region, can now benefit from the more diversified branch network of Punjab National Bank which had vast network in northern and central region before the merger. Similarly, Indian Bank, which Dun & Bradstreet